What’s Ahead? At a Glance - Key Developments in Canadian Securities Regulation for the Investment Management Industry

The Investment Management Group at Borden Ladner Gervais consists of a team of over 50 lawyers located in offices across Canada who understand the business, regulatory and administrative issues that face participants in the Canadian investment management industry. We have the largest and most experienced investment management practice in Canada, having provided legal services to Canadian and international industry participants for over 50 years.

Our lawyers are leaders in investment funds, registrant regulation and compliance, private-pooled and hedge funds, segregated funds and structured products. BLG's Investment Management Group is ranked Number 1 in Canada in The Best Lawyers in Canada^® (2008 - 2011) in the fields of Mutual Funds Law and Private Funds Law. Several of our lawyers are recognized as leaders in the area of investment funds in industry publications, including:

• Guide to Leading 500 Lawyers in Canada (Lexpert/American Lawyer)
• Canadian Legal Lexpert Directory
• Best Lawyers in Canada
• Who's Who Legal The International Who's Who of Business Lawyers
• PLC Cross border Investment Funds Handbook

Our clients, both Canadian and international, include open and closed end investment fund complexes, providers of alternative investment, pooled and private equity products, portfolio managers and dealers, financial institutions, service providers, securities regulators, self regulatory organizations and industry trade associations.

BLG is a leading, full service, integrated national law firm focusing on business law, litigation and intellectual property solutions for our clients. With more than 750 lawyers, intellectual property agents and other professionals in Vancouver, Calgary, Toronto, the Waterloo Region, Ottawa and Montréal, clients turn to BLG for assistance with their legal needs, from major litigation to corporate finance and patent registration.

Copyright 2010 by Woodward/White, Inc., Aiken, SC.

WHAT'S HAPPENED

WHAT'S NEXT?

Canadian Securities Regulatory Authority

Government of Canada Moves to Protect Canadian Investors: Backgrounder, Fact Sheets and Proposed Canadian Securities Act Department of Finance Canada May 2010.

Canadian Securities Transition Office (CSTO) commenced work in July 2009 with a mandate from the Government of Canada to lead and manage the transition from the current system of provincial/territorial regulation to a single, national securities regulator. The goal of the Government of Canada and the Canadian Securities Transition Office is to have the Canadian Securities Regulatory Authority operative by July 1, 2012. Information about the CSTO and the CSRA available at www.csto.ca.

See Proposed Federal Securities Act Referred to the Supreme Court of Canada Securities & Capital Markets Alert May 28, 2010 Borden Ladner Gervais LLP.

Transition Plan For the Canadian Securities Regulatory Authority Canadian Securities Transition Office July 2010.

Registrant Regulation – Non-SRO

CSA Staff Notices 31-313 and 31-314 NI 31-103 Registration Requirements and Exemptions and Related Instruments – Frequently Asked Questions as of February 5, 2010 (Consolidated) CSA December 2009 and February 2010.

NI 31-103 in force as of September 28, 2009. Various transition periods for specified rules ended September 28, 2010.

Comment period on the June 2010 publication of proposed "first year" amendments to NI 31-103 ended September 30, 2010. Comment letters, including comment letter of Borden Ladner Gervais LLP, available on OSC website.

Comment period on AMF consultation paper ends on November 30, 2010.

Comment period on the October 2010 publication of proposed IFM-related amendments to NI 31-103 ends on January 13, 2011.

See BLG's nine-part series Keeping Reforms in Sight: Understanding the New Canadian Registration Requirements Canadian Securities Regulators Release Final Registration Rule (July 2009), What's New? Investment Dealers IIROC Members; What's New? Mutual Fund Dealers MFDA Members; What's New? Exempt Market Dealers; What's New? Advisers – Portfolio Managers; What's New? Investment Fund Managers; Impact on the Hedge Fund Industry, Impact on Non-Canadian Securities Market Participants, National Instrument 31-103 – At A Glance Investment Management Advisory August 2009 Borden Ladner Gervais LLP.

See National Instrument 31-103: The First Six Months – What's Next? Investment Management Bulletin April 2010 Borden Ladner Gervais LLP.

See The Canadian Registration Regime: Canadian Regulators Propose "First Year" Amendments to National Instrument 31-103 and Other Developments. Investment Management Bulletin August 2010 Borden Ladner Gervais LLP.

See AMF Consultation on Harmonizing Regulation of Québec Mutual Fund Dealers Investment Management Bulletin October 2010 Borden Ladner Gervais LLP.

Proposed Amendments to National Instrument 31-103 Registration Requirements and Exemptions and National Instrument 33-109 Registration Information and related policies and Forms CSA June 2010.

CSA Staff Notice 31-318 Omnibus/Blanket Order Exempting Mortgage Investment Entities from the Requirement to Register as Investment Fund Managers and Advisers CSA August 2010.

Proposed Amendments to National Instrument 31-103 Registration Requirements and Exemptions – Registration of International and Certain Domestic Investment Fund Managers CSA October 2010.

Notice 31-320 Additional Request for Comment by the OSC and the AMF – Proposed Exemptions from Investment Fund Manager Registration Requirement for International and Certain Domestic Investment Fund Managers OSC and AMF October 2010.

Consultation Paper on the Harmonization of Mutual Fund Distribution Regulations Autorité des marchés financiers October 2010.

Registrant Regulatory Compliance

OSC Staff Notice 33-729 Marketing Practices of Investment Counsel/Portfolio Managers OSC November 2007.

OSC Staff Notice 11-760 Report on Mutual Fund Sales Practices under Part 5 of National Instrument 81-105 Mutual Fund Sales Practices OSC April 2007.

OSC Staff Notice 11-763 A Focused Review of the Securities Valuation and Expense Allocation Practices of Fund Managers OSC July 2008.

10 Most Common Deficiencies Among Portfolio Managers OSC October 2008.

CSA Staff Notice 33-315 Suitability Obligation and Know Your Product CSA September 2009.

OSC staff notices outline common compliance deficiencies for fund managers, advisers (portfolio managers) and exempt market dealers.

See OSC Provides Guidance on Complying with Mutual Fund Sales Practices Rule Investment Management Advisory May 2007 Borden Ladner Gervais LLP.

See Ontario Securities Commission Staff Notice Released On Marketing Practices of Registered Advisers Registrant Regulation and Compliance Alert Investment Management Advisory November 2007 Borden Ladner Gervais LLP.

OSC Staff Notice 33-734 2010 Compliance and Registrant Regulation Branch Annual Report OSC October 2010.

OSC Staff Notice 81-712 2010 Investment Funds Branch Report OSC October 2010.

International Financial Reporting Standards (IFRS) – Registrants and Investment Funds

Proposed amendments to National Instrument 81-106 Investment Fund Continuous Disclosure CSA October 2009.

NI 52-107 and IFRS related amendments to NI 31-103 effective on January 1, 2011.

IFRS amendment to NI 81-106 deferred while CSA staff consider impact of deferral of certain accounting principles. CSA expect to republish or finalize amendments to NI 81-106 by mid-2011.

See Compliance with International Financial Reporting Standards (IFRS) for Canadian Registrants and Investment Funds Investment Management Bulletin November 2010 Borden Ladner Gervais LLP.

National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards and related companion policy CSA October 2010.

Amendments to National Instrument 31-103 Registration Requirements and Exemptions CSA October 2010.

CSA Staff Notice 81-320 Update on International Financial Reporting Standards for Investment Funds CSA October 2010.

Modernization of Investment Fund Rules

OSC Staff Notice 81-710 Approvals for Change in Control of a Mutual Fund Manager and Change of a Mutual Fund Manager under National Instrument 81-102 Mutual Funds OSC May 2010.

Proposed amendments to National Instrument 81-102 Mutual Funds and National Instrument 81-101 Mutual Fund Prospectus Disclosure and related policies. CSA June 2010.

Comment period on proposed amendments to NI 81-102 and NI 81-101 which relate to "modernization" of the rules related to ETFs, money market funds, short selling and fund of funds, among other things, ended on September 24, 2010. Comment letters, including comment letter of Borden Ladner Gervais LLP, available on the OSC website.

See Canadian Regulators Propose Modernized Rules for Mutual Funds: ETFs, Money Market Funds, Short Selling, Fund of Funds Investment Management Bulletin July 2010 Borden Ladner Gervais LLP.

Investment Fund Governance

National Instrument 81-107 Independent Review Committee for Investment Funds CSA July 2006.

CSA Staff Notice 81-317 Frequently Asked Questions on National Instrument 81-107 Independent Review Committee for Investment Funds CSA March 2007.

OSC and AMF staff reviewing disclosure of funds and their IRCs, as well as the results of informal interviews by the OSC of IRC members, to determine extent of compliance with NI-107. Staff notice expected to be released in December 2010 on results of review.

See Canadian Investment Fund Governance Becomes Reality: Final National Instrument 81-107 Released Investment Management Advisory August 2006 Borden Ladner Gervais LLP; and BLG's ten-part series of Practice Bulletins entitled BlG's Countdown to Governance: Getting Ready, June 2006 to September 2006.

See A Year two Review for Independent Review Committees Investment Management Advisory December 2008 Borden Ladner Gervais LLP.

Asset Backed Commercial Paper and Investment Funds

Securities Regulatory Proposals Stemming from the 2007/08 Credit Market Turmoil and its Effect on the ABCP Market in Canada CSA October 2008.

Comment period on consultation paper ended February 16, 2009. CSA considering comments provided on various questions posed in consultation paper, including those related to investments by mutual funds, and specifically money market funds, in ABCP. Proposed rule amendments to NI 81-102 published for comment in June 2010 resulted from this consultation paper.

Scholarship Plan Regulation

Proposed Amendments to National Instrument 41-101 General Prospectus Requirements, Form 41-101F2 and Related Amendments. CSA March 2010.

Comment period on the proposed amendments to National Instrument 41-101 to implement new prospectus disclosure for scholarship plans ended June 22, 2010. CSA considering comments.

Regulation of Closed-End and Listed Investment Funds

Amendments to Part VI of the Toronto Stock Exchange (TSX) Company Manual (The Manual) The Toronto Stock Exchange July 2010.

Amendments to the TSX Company Manual relating to mergers of investment funds finalized in July 2010 and became effective August 16, 2010.

See TSX Proposes New Security Holder Approval Requirements for Acquisitions of Listed Investment Funds Investment Management Advisory November 2009 Borden Ladner Gervais LLP.

OSC Staff Notice Closed-End Investment Fund Conversions to Open-End Mutual Funds OSC October 2010.

Capital Accumulation Plans Guidelines and Proposed Exemptions for Mutual Funds

Joint Forum of Financial Market Regulators Guidelines for Capital Accumulation Plans May 2004.

Amendments to National Instrument 45-106 Prospectus and Registration Exemptions and Adoption of Local Prospectus and Registration Exemptions for Certain Capital Accumulation Plans CSA October 2005.

All Canadian regulators, other than the OSC and the Québec regulator, granted "blanket" prospectus and registration exemptions to allow mutual funds to be used as investment options for CAPs. Comment period on proposed amendments to NI 45-106 ended January 19, 2006. Comment letters, including comment letter of Borden Ladner Gervais LLP, being considered by CSA.

Insider Reporting and Early Warning Reports

National Instrument 55-104 Insider Reporting Requirements and Exemptions, Companion Policy and Related Consequential Amendments, including to National Instrument 62-103 The Early Warning System and Related Take Over Bid and Insider Reporting Issues. CSA January 2010.

National Instrument 55-104 and related amendments came into force on April 30, 2010. The accelerated filing deadline (from 10 to 5 days) for insider reports became effective on November 1, 2010.

See Changes to Insider Reporting: 5 Day Filing, Deemed Beneficial Ownership and Reporting for Derivatives Securities & Capital Markets Bulletin January 2010 Borden Ladner Gervais LLP.

See New Conditions to the Insider Reporting Exemption for Eligible Institutional Investors Effective April 30, 2010 Investment Management Alert April 2010 Borden Ladner Gervais LLP.

Straight Through Processing

Amendments to National Instrument 24-101 Institutional Trade Matching and Settlement and Companion Policy 24-101CP CSA April 2010.

Amendments to NI 24-101 came into force July 1, 2010 and change the requirements related to trade matching.

Soft Dollars

National Instrument 23-102 Use of Client Brokerage Commissions as Payment for Order Execution Services or Research Services CSA October 2009.

Amendments to National Instrument 81-101 Mutual Fund Prospectus Disclosure and National Instrument 41-101 General Prospectus Requirements CSA April 2010.

Final rule in force June 30, 2010. Six month transition period for prescribed disclosure to existing clients. Amendments to National Instrument 81-101 (AIF disclosure for mutual funds) and National Instrument 41-101 (prospectus disclosure for investment funds) became effective June 30, 2010.

See Rules Regulating the Use of Client Brokerage Commissions in Canada to be Effective June 30, 2010 Investment Management advisory November 2009 Borden Ladner Gervais LLP.

Beneficial Owners and Meetings

Proposed amendments to National Instrument 54-101 Communication with Beneficial Owners of Securities of a Reporting Issuer and Companion Policy 54-101CP, National Instrument 51-102 Continuous Disclosure Obligations and its related forms and Companion Policy and National Policy 11-201 Delivery of Documents by Electronic Means.

Comment period on the proposed amendments, which will introduce, among other things a "notice and access" regime for meetings other than special meetings and enhanced disclosure regarding the beneficial owner voting process, ended August 31, 2010. CSA considering comments received.

Best Execution and Other Trading Rules

Amendments to National Instrument 21-101 Marketplace Operation and National Instrument 23-101 Trading Rules CSA November 2009.

CSA/IIROC Joint Staff Notice 23-308 Update on Forum to Discuss CSA/IIROC Joint Consultation Paper 23-404 "Dark Pools, Dark Orders and Other Developments in Market Structure in Canada" and Next Steps. CSA/IIROC May 2010.

Amendments to National Instruments 21-101 and 23-101 relating to best execution came into force on September 12, 2008. Further amendments to these National Instruments to mandate order protection (previously known as trade-through protection) finalized in November 2009. Rules regarding order protection to come into force February 1, 2011. Other rules in force January 28, 2010.

CSA/IIROC staff continue to review the issues discussed in Joint Staff Notice and Joint Consultation Paper. A further joint consultation paper expected to be published for comment before year end 2010.

Hedge Funds and Other Alternative Investment Products

OSC Staff Notice 33-733 Report on Focused Reviews of Investment Funds, September 2008 – September 2009. CSA January 2010.

OSC Staff Notice reports on findings from focused reviews of money market funds, hedge funds and structured products (non redeemable investment funds) conducted from September 2008 – September 2009.

See OSC Targets Hedge Funds – Again Investment Management Alert february 5, 2009 Borden Ladner Gervais LLP.

Regulation Of Derivatives

Final Report Ontario Commodity Futures Act Advisory Committee January 2007.

Regulatory Analysis of Contracts for Differences (CFDs) Investment Dealers Association of Canada June 2007.

Proposed Framework for Regulation of Derivatives Market in Québec Autorité des marchés financiers August 2007.

Bill 77 Derivatives Act (Québec) June 2008. The Derivatives Regulation Autorité des marches financiers December 2008.

Policy Statements respecting Accredited Counter-parties, Hybrid Products and Self- Certification Autorité des marchés financiers January 2009.

OSC Staff Notice 91-702 Offerings of Contracts for Differences and Foreign Exchange Contracts to Investors in Ontario OSC October 2009.

Derivatives Act (Québec) and related regulations and policies came into force as of February 1, 2009.

Comments on CSA Derivatives Committee's consultation paper due by January 14, 2011.

See Québec Derivatives Act in Force as of February 1, 2009 Key Considerations for Industry Participants Investment Management Alert February 2, 2009 Borden Ladner Gervais LLP.

See OSC Issues Staff Notice 91-702 Offerings of Contracts for Difference and Foreign Exchange Contracts to Investors in Ontario Securities & Capital Market Alert October 2009 Borden Ladner Gervais LLP.

See Continued Harmonization Regarding the Distribution of CFDs and FOREX: BC Securities Commission Grants Order to CMC Markets Securities & Capital Markets Alert June 2010 Borden Ladner Gervais LLP.

See Over-the-Counter (OTC) Derivatives Market in Canada: On the Road to Reform and Regulation Financial Services Client Update November 2010 Borden Ladner Gervais LLP.

CSA Consultation Paper 91-401 Over-the-Counter Derivatives Regulation in Canada CSA Derivatives Committee November 2010.